UCS: Increasing Fuel Economy Would Generate Jobs in the US Economy and Auto Industry

13 July 2007

Increasing the average fuel economy of new light duty vehicles to 35 mpg by 2018 would increase US employment by 241,000 jobs in the year 2020, including 23,900 in the auto industry, according to a new analysis from the Union of Concerned Scientists (UCS). The increase in fuel economy would also save consumers $61 billion at the gas pump.

According to the analysis, nearly $24 billion of the fuel savings would become new revenue for automakers in 2020—paying for the improved technologies plus some profit. Consumers could then choose how to spend the remaining $37 billion saved on gasoline in that year.

Putting technology to work means putting people to work, whether it’s in the computer industry or the auto industry. A 35 mpg standard means billions of dollars helping to create more US jobs, not lining the pockets of the oil industry and their overseas suppliers.

—David Friedman, author of the study and research director of the Clean Vehicles Program at UCS

Shifting that money from the oil industry to more productive parts of the economy would generate 82,900 new jobs in the service industry; 44,400 jobs in the retail trade industry; 33,100 jobs in the finance, insurance, and real-estate industries; and 17,800 jobs in manufacturing industries outside the auto industry, according to the report.

Thousands of other jobs would be created in agriculture, construction, transportation, utilities, and government. Oil and associated industries would see their job forecasts drop by 21,000, though these jobs would be shifted to other sectors of the economy, yielding a net increase of 241,000 new jobs.

UCS used a macroeconomic model that includes industry-specific data derived from a government designed analysis tool to analyze the job impacts on 528 different economic sectors. Overall, states that use more gasoline and that have more industry will gain the most jobs. Seven states will add at least 10,000 jobs in 2020: California 32,500; Texas 14,700; Florida 14,300; New York 13,100; Michigan 11,000; Ohio 10,500; and Illinois 10,300 jobs.

In the analysis, UCS used industry-specific data derived from a macroeconomic impact analysis
tool, IMPLAN (Impact Analysis for PLANning). This model incorporates interactions among 528
industrial sectors using 21 economic variables to trace supply linkages and evaluate how changes in spending affect employment, wages, and the national gross domestic product.

To estimate the costs and savings resulting from an increase in fuel economy to 35 mpg by 2018, UCS used a modified version of the LEAP vehicle stock model from Tellus and its own
cost/performance analyses.

Key assumptions in the analysis include:

A mileage rebound of 10 percent;

A vehicle price elasticity of one;

A real discount rate of five percent;

An average gasoline price of $2.55 per gallon;

An average 15-year, 170,000-mile vehicle lifetime;

A discount factor of about 0.8 to convert federal test fuel economy values to real-world values; and

Combined vehicle and upstream emissions of 11.1 kg/gallon of gasoline (24.5
pounds per gallon of gasoline).

UCS analyzed both the direct and indirect investments generated by technology improvements, as well as the re-spending of fuel cost savings. The analysis provided a national industry-by-industry breakdown of job impacts for the years 2020 and 2030.

UCS allocated the national impacts among the states using gasoline consumption data and
prices in each state, along with state employment projections for each industry from the Bureau of Labor Statistics (BLS) and the Bureau of Economic Analysis (BEA).

Overall, states that use more gasoline and that have more industry will gain the most jobs. Seven states will add at least 10,000 jobs in 2020: California 32,500, Texas 14,700, Florida 14,300, New York 13,100, Michigan 11,000, Ohio 10,500, and Illinois 10,300 jobs.

According to the UCS analysis, the increase in fuel economy would cut oil consumption by 1.6 million barrels per day and reduce greenhouse gas emissions by more than 260 million metric tons, akin to taking nearly 40 million of today—s average cars and trucks off the road in 2020.

The study comes as the House of Representatives begins wrangling over a package of energy legislation that could include debate over a bill introduced by Rep. Ed Markey (D-MA) and Rep. Todd Platts (R-PA) that calls for increasing fuel economy standards by four percent per year, with guaranteed progress to 35 mpg by 2018.

In March, automotive engineers at UCS unveiled a minivan design they said showed that automakers could build affordable vehicles with existing technology that would meet or exceed the global warming pollution standards for cars and trucks that have been adopted by California and 10 other states. (Earlier post.)

Resources:

Creating Jobs, Saving Energy, and Protecting the Environment: An Analysis of the Potential Benefits of Investing in Efficient Cars and Trucks (download from UCS site)

Comments

So how much would this UCS minivan cost and how does it compare to the performance and utility of current designs?

If such a design is non-competitive people will just buy used or keep their older cars until there are compelling products.

The next few years will be interesting.

Will CAFE allow a relaxation of emissions in order to allow a more diverse set of technoligies to be used to achieve higher real world mileage figures?

For example, a car getting 30mpg today with a stoichiometric burning engine (needed in order for the 3-way catalyst to work) could get 35-40mpg very conservatively with lean burn. If all the cars on the road used or were converted to lean burn engines... I wonder how many gallons could be saved and thus how much less CO2 would be released into the air.

At what point is it more important for the exhaust to be "clean" at the cost of burning more fuel for every car across the nation. Automakers design cars to meet the most stringent rules so that they can be sold in all states. However what works well in the rush hour traffic of California may not be the best thing for the nation as a whole.

Is NOx a greenhouse gas, or is it just that it can be poisoness at high concentrations before it decomposes to NO and ozone? Since CO2 is supposed to be the greenhose gas responsible for global warming, wouldn't it make sense to free companies to use whatever technology they could to reduce CO2 as much as possible?

Wouldn't it be wiser to let only the federal government to regulate CO2 and NOx emissions with a function... allowing higher NOx emissions as long as the CO2 emissions are proportionally smaller. This would make much more sense than an arbitrary cap of both for certain states. If only certain states use CARB, all the states end up getting cars made to meet CARB weather or not it's good for them and their voters.

The average domestic autoworker makes $141-151k per year when all wages and benefits are taken into account. Compare $96k for Toyota, Honda, and Nissan.

Wonder why the domestics worry about increasing CAFE so much? There's one big reason right there. This is why they make little or no profit on small cars. This is why they have to focus on big, expensive SUVs to make a profit.

Yes, they want to supersize your car so you will pay more, even though it doesn't cost them much more. They also have some fiscal inertia with their current assembly lines. They want to crank out a million cars on each line to fully amortize before retooling. If they had to switch over to carbon-fiber-thermo-plastic chassis, parallel-drive hybrids, and such, it would cause some write-offs of expensive lines.

However, their current model is not exactly getting them the happiness they want. How many 12 billion dollar losses (Ford), 4 billion dollar losses (GM), or firesale LBO's (Chrysler) are they going to have before they jettison their labor issues? The only reason I can come up with for why Cerberus bought Chrysler was that they were legally confident they could dump the pension liability (on the givernment, convert it into a mutual fund, or I don't know what). I think their position will be, "Sign away your pension in exchange for 'X' or we'll go bankrupt and you won't have a pension."

I wonder how desperate one of those 3 will have to be before they try making radically simpler cars out of some of the lower cost composites (e.g., these guys http://www.fiberforge.com/index.html that were spun off of the RockyMountainInstitute's Hypercar research)? Supposedly they could reduce the chassis to just a few pieces that would go together with minimal labor, and that might offset that carbon-fiber costs more than steel, and gives them a big weight reduction selling point.

As to political will and CAFE, Michigan is only one state, and the Senate just voted to bump up CAFE. The House will do something similar. Bush would have a hard time vetoing it, since he asked for it in his State of the Union.

The UCS claims rely on some questionable assumptions. One example is that pickups could be made to average 28 mpg, with the same size, power and functionality for $1500 cost to the consumer.

I don't think that's anywhere close to reality. For example, at leat 4 OEMs have announced diesels for light-duty trucks, at likely price deltas of $4,000 or so, but I doubt any of them will reach 28 mpg combined. 'nuf said?

Factory rat might be onto something here, at least if you insist on the same size and power. IMHO those are parameters that could shift a bit. Pickups of late have gotten entirely too large. Power is fun but I would argue that 6000 pound SUVs that accelerate like sports cars are a luxury that our country can no longer afford, even if the drivers of those SUVs can.

Fortunately, gasoline engines will so undergo major leaps in improving fuel efficiency over the next 5-7 years. I see the following technologies come online:

1) Direct fuel injection, which will allow for lean-burn operation to improve fuel efficiency even more. Sure, the NOx output is higher, but now that EPA mandates low-sulfur gasoline, we can use the latest catalytic converter designs to reduce NOx output at the exhaust tailpipe back to EPA Tier 2 Bin 5 compliance.

2) Improved variable valve timing, which allow for more efficient "breathing" of the engine for better fuel economy. In fact, after 2010 we may see the first engines with NO cams to control the valves, since the valve movement will be all electrically-actuated.

4) The arrival of homogeneous charge compression-ignition (HCCI) gasoline engines, which offer the same fuel efficiency as diesel engines but with far lower exhaust emissions.

5) The use of "smart" forced-air induction, which allows engines to be drastically reduced in displacement without losing power; Volkswagen's 1.4-liter TSI TwinCharger engine generates around 165 bhp (SAE 08/04 net), but offers much better fuel efficiency than the equivalent 2.5-liter I-5 engine VW also sells.

6) The use of E85 as a "booster" fuel, which will allow for a smaller turbocharged engine that uses E85 fuel on an as-needed basis to boost power for short periods (most people don't realize that in steady cruise or slower acceleration they use only a tiny fraction of the potential output of a conventional engine, so in many driving situations they don't really need the full power of a big engine).

I like the sound of your mind there Raymond. But here's a question: will it be possible to have those improvements and still stay in the least bit cost competitive if the American Big 3 still have the same entitlement benefits for their unionized workers?? Probably not a snowball's chance in hell with the huge worker liabilities that they all have. The Japanese Big 3 have a lot more opportunity to move forward with everything you mentioned because their workers aren't sinking them, while the US Big 3 have their hands tied.

I know it's convenient to blame the US automakers and just accuse them of a whole slew of things, like being slow with innovation, etc. But it's pretty damn hard to run a profitable business with the ENORMOUS retiree benefits packages let alone the current employee packages. The US Big 3 haven't always made the best decisions, but they also have very little chance for domestic innovation with such tight margins via worker compensation. The UAW seems to forget that they work for their employers, the employers do not exist to serve them.
Disclaimer: I drive a Toyota

I'm a little sceptical of the precision of the numbers the UCS quotes. How can you predict job growth for any one state down to the nearest 100?

Also, the European experience is that consumers are prepared to pay extra for more sophisticated technology, but they then hang on to their cars for longer. The net result is higher margins per car but lower production volume. Many European auto manufacturers have long suffered from structural overstaffing, a problem compounded by strong unions and/or politicians focussed on the next election rather than the long-term health of the industry.

The other lesson is that consumers will pay extra for greater fuel economy IFF fuel is expensive relative to disposable income. After several years of rising fuel prices in the US, that may now apply to low-income families there. It does not yet apply to the more affluent strata of society. The difference to Europe is that the US electorate (= consumers) has begun to realize just how staggeringly expensive protecting US hegemony over oil supplies from the Middle East has now become (US$12 bn a month and rising).

The assumption that cars have an average lifespan of 15 years / 170,000 miles seems a bit strained. I recall reading on this site certain postings indiciating that the average service lifetime of a car on the American road is just under 10 years, which would correspond to a mileage of 120,000 to 150,000 at current rates.

Personal note: My car is 14 years old and has 165,000 miles on it. Replacing it would be a needless expense, and I suspect that the resources and energy embodied in it are substantial. Also, it is a Ford product, and based on my experience with its reliability, I tend to discount Detroit bashing, but only a little.

UP for grabs, breaking down economic and social barriers,redeeming God's own land and God's own people from the Demonic economic claws constraining citizens from what the US was meant to stand for; righteousness.
Up UCS.
George
Nigertia

The idea that a full size pickup can get 28 MPG for $1500 cost increase is ludicrous and laughable. I wonder how much Hemp the UCS authors were smoking.

The UCS is simply a left wing, socialist, command and control political organization. “You wealthy Americans make too much money and use too many resources. In addition, we scientists are underpaid and anyone who can afford a 400 HP Escalade and the fuel to go in it is too rich and basically evil.” Global warming is the UCS's stick to beat everyone who has been making too much money and using too many resources back down to their idea of a classless, socialist utopia. Just look at the posts on this board about the good old days of underpowered, lighter, less capable, less safe pickup trucks.

Find the backbone to tax gas or leave the auto and truck industry alone. Raising gas taxes by some set amount per year, say 25 cents/year from 2010 to 2020 will reduce fuel use far more than any moronic CAFE law ever will. The original CAFE law helped created the SUV craze, so “let’s try to improve CAFE, trust us; we'll get it right this time.” If anyone believes the “new and improved” CAFE will really work as advertised, they must have been smoking something similar to the UCS people who believe in a 28 MPG pickup truck for and extra $1500. In fact, I can already think of a potential new CAFE loophole. Make a plug in serial hybrid (I’m thinking the unnecessarily complex parallel hybrid will be gone in 5 to 10 years) that gets 100 MPG, then you can sell 5 low MPG trucks or sports cars against the plug in and still meet your CAFE average. Kind of like Ford loosing money on the Escort for years to meet their CAFE average and still sell larger, profitable vehicles their customers actually wanted to buy.